CONSUELO METAL CORPORATION v PLANTERS DEVELOPMENT

BANK
G.R. No. 152580, June 26, 2008

On 1 April 1996, CMC filed before the SEC a petition to be declared in a state
of suspension of payment, for rehabilitation, and for the appointment of a
rehabilitation receiver or management committee under Section 5(d) of
Presidential Decree No. 902-A. On 2 April 1996, the SEC, finding the petition
sufficient in form and substance, declared that all actions for claims against
CMC pending before any court, tribunal, office, board, body and/or
commission are deemed suspended immediately until further order from the
SEC. On 29 November 2000, upon the management committees
recommendation, the SEC issued an Omnibus Order directing the dissolution
and liquidation of CMC.[9] The SEC also directed that the proceedings on
and implementation of the order of liquidation be commenced at the Regional
Trial Court to which this case shall be transferred. Thereafter, respondent
Planters Development Bank (Planters Bank), one of CMCs creditors,
commenced the extra-judicial foreclosure of CMCs real estate mortgage. The
case was then transferred to the trial court. In its 25 April 2001 Order, the trial
court denied CMCs motion for issuance of a temporary restraining
order. On 13 June 2001, Planters Bank extra-judicially foreclosed the real
estate mortgage.
Issues: 1) Does the trial court have jurisdiction over CMCs liquidation?
2) Was the foreclosure of the real estate mortgage Planters Banks
valid?
Held: 1) Yes. Republic Act No. 8799 (RA 8799)[15] transferred to the
appropriate regional trial courts the SECs jurisdiction defined under Section
5(d) of Presidential Decree No. 902-A. Section 5.2 of RA 8799 provides:

The Commissions jurisdiction over all cases enumerated under Sec. 5 of

Presidential Decree No. 902-A is hereby transferred to the Courts of general
jurisdiction or the appropriate Regional Trial Court: Provided, That the
Supreme
Court
in
the
exercise
of
its
authority
may
designate the Regional Trial Court branches that shall exercise jurisdiction
over these cases. The Commission shall retain jurisdiction over pending

cases involving intra-corporate disputes submitted for final resolution which

should be resolved within one (1) year from the enactment of this Code. The
Commission shall retain jurisdiction over pending suspension of
payments/rehabilitation cases filed as of 30 June 2000 until finally
disposed.
While CMCs petition was still pending with the SEC as of 30 June 2000, it
was finally disposed of on 29 November 2000 when the SEC issued its
Omnibus Order directing the dissolution of CMC and the transfer of the
liquidation proceedings before the appropriate trial court. The SEC finally
disposed of CMCs petition for suspension of payment when it determined that
CMC could no longer be successfully rehabilitated.
While the SEC has jurisdiction to order the dissolution of a
corporation,[16] jurisdiction over the liquidation of the corporation now pertains
to the appropriate regional trial courts. This is the correct procedure because
the liquidation of a corporation requires the settlement of claims for and
against the corporation, which clearly falls under the jurisdiction of the regular
courts. The trial court is in the best position to convene all the creditors of the
corporation, ascertain their claims, and determine their preferences.

2) Yes. We hold that if rehabilitation is no longer feasible and the assets of the
corporation are finally liquidated, secured creditors shall enjoy preference
over unsecured creditors, subject only to the provisions of the Civil Code on
concurrence and preference of credits. Creditors of secured obligations may
pursue their security interest or lien, or they may choose to abandon the
preference and prove their credits as ordinary claims.[18]
In this case, Planters Bank, as a secured creditor, enjoys preference
over a specific mortgaged property and has a right to foreclose the mortgage
under Section 2248 of the Civil Code. The creditor-mortgagee has the right
to foreclose the mortgage over a specific real property whether or not the
debtor-mortgagor is under insolvency or liquidation proceedings. The right to
foreclose such mortgage is merely suspended upon the appointment of a
management committee or rehabilitation receiver[19] or upon the issuance of a
stay order by the trial court.[20] However, the creditor-mortgagee may exercise
his right to foreclose the mortgage upon the termination of the rehabilitation
proceedings or upon the lifting of the stay order

Manuel D. Yngson v. Philippine National Bank

G.R. No 171132, August 15, 2012
Facts:
ARCAM & Company, Inc. (ARCAM), engaged in the operation of a sugar mill
in Pampanga, applied for and was granted a loan by respondent Philippine
National Bank (PNB). To secure the loan, ARCAM executed a Real Estate
Mortgage over a piece of land and a Chattel Mortgage over various personal
properties consisting of machinery, generators, field transportation and heavy
equipment.
ARCAM, however, defaulted on its obligations and PNB initiated extrajudicial
foreclosure proceedings. ARCAM filed before the SEC a Petition for
Suspension of Payments, Appointment of a Management or Rehabilitation
Committee, and Approval of Rehabilitation Plan, with application for issuance
of a temporary restraining order (TRO) and writ of preliminary injunction. The
SEC Hearing Panel also granted PNBs motion to dissolve the preliminary
injunction and appointed Atty. Manuel D. Yngson, Jr. & Associates as
Liquidator for ARCAM. Petitioner posited that all actions against companies
which are under liquidation, like ARCAM, are suspended because liquidation
is a continuation of the petition for suspension proceedings.
Issue:
Can PNB, as a secured creditor, foreclose on the mortgaged properties of a
corporation under liquidation without the knowledge and prior approval of the
liquidator or the SEC?
Held:
Yes. If rehabilitation is no longer feasible and the assets of the corporation are
finally liquidated, secured creditors shall enjoy preference over unsecured
creditors, subject only to the provisions of the Civil Code on concurrence and
preference of credits. Creditors of secured obligations may pursue their
security interest or lien, or they may choose to abandon the preference and
prove their credits as ordinary claims. A preference applies only to claims
which do not attach to specific properties. A lien creates a charge on a
particular property. Section 2248 of the Civil Code provides:
Those credits which enjoy preference in relation to specific real property or
real rights, exclude all others to the extent of the value of the immovable or
real right to which the preference refers.
Under Republic Act No. 10142, otherwise known as the Financial
Rehabilitation and Insolvency Act (FRIA) of 2010, the right of a secured
creditor to enforce his lien during liquidation proceedings is retained. PNB
elected to maintain its rights under the security or lien; hence, its right to
foreclose the mortgaged properties should be respected. The creditormortgagee has the right to foreclose the mortgage over a specific real
property whether or not the debtor-mortgagor is under insolvency or
liquidation proceedings. It is a right to a first preference in the discharge of the
funds of the judgment debtor.